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Financial Statements
Statements of Income...................................................................................................... 5
We have audited the accompanying financial statements of Samsung Electronics Co., Ltd. (the
“Company”), which comprise the statements of financial position as of December 31, 2010, December
31, 2009, and January 1, 2009, the related statements of income, comprehensive income, changes in
equity and cash flow for the years ended December 31, 2010 and 2009, and the related notes. These
financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of
Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits and the
reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above present fairly, in all
material respects, the financial position of Samsung Electronics Co., Ltd. as of December 31, 2010,
December 31, 2009, and January 1, 2009, and of their financial performance and their cash flows for
the years ended December 31, 2010 and 2009, in accordance with International Financial Reporting
Standards as adopted by the Republic of Korea.
Seoul, Korea
March 2, 2011
This report is effective as of March 2, 2011, the audit report date. Certain subsequent events or
circumstances, which may occur between the audit report date and the time of reading this report,
could have a material impact on the accompanying financial statements and notes thereto.
Accordingly, the readers of the audit report should understand that there is a possibility that the above
audit report may have to be revised to reflect the impact of such subsequent events or circumstances,
if any.
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Non-current assets
Available-for-sale financial assets 7 2,690,819 1,308,675 1,128,853 2,362,647 1,149,069 991,178
Associates and joint ventures 10 22,631,419 22,046,679 20,390,192 19,871,296 19,357,871 17,903,409
Property, plant and equipment 11 38,708,906 32,306,828 35,066,116 33,987,976 28,366,694 30,789,460
Intangible assets 12 2,439,491 1,020,209 1,020,146 2,141,971 895,785 895,729
Deposits 280,879 256,503 271,405 246,623 225,220 238,305
Long-term prepaid expenses 3,411,517 2,342,921 311,106 2,995,449 2,057,179 273,164
Other non-current assets 772,844 428,632 557,358 678,589 376,355 489,382
Total assets 107,179,005 89,609,354 78,657,209 94,107,477 78,680,616 69,064,193
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Non-current liabilities
Long-term trade and other payables 870,180 900,648 333,940 764,053 790,805 293,213
Debentures 14 87,338 94,993 108,170 76,686 83,408 94,978
Retirement benefit obligation 15 472,012 613,791 725,195 414,446 538,933 636,750
Deferred income tax liabilities 27 328,921 493,371 819,541 288,806 433,200 719,590
Provisions 16 295,356 244,443 176,887 259,334 214,631 155,314
Other non-current liabilities 166,291 202,918 174,010 146,010 178,170 152,787
Total liabilities 27,211,835 22,854,888 17,722,215 23,893,085 20,067,511 15,560,817
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Cost of sales
77,980,673 65,107,368 68,470,167 57,166,887
Gross profit
34,268,802 24,665,466 30,089,386 21,657,271
Research and development
expenses 8,589,582 7,042,549 7,541,998 6,183,641
Selling, general and
administrative expenses 24 13,360,678 11,170,759 11,731,213 9,808,376
Other operating income 25 3,356,213 1,564,804 2,946,890 1,373,961
Other operating expenses 25 750,614 629,828 659,069 553,014
Operating profit 14,924,141 7,387,134 13,103,996 6,486,201
Finance income 26 4,455,961 6,495,444 3,912,513 5,703,261
Finance expense 26 4,350,770 6,825,540 3,820,151 5,993,099
Profit before income tax 15,029,332 7,057,038 13,196,358 6,196,363
Income tax expense 27 1,792,871 848,898 1,574,213 745,366
Profit for the year 13,236,461 6,208,140 11,622,145 5,450,997
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Net decrease in cash and cash equivalents (315,858) (217,970) (277,336) (191,386)
Cash and cash equivalents
Beginning of the year 2,142,220 2,360,190 1,880,955 2,072,341
End of the year 1,826,362 2,142,220 1,603,619 1,880,955
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
1. General Information
These separate financial statements are prepared in accordance with Korean IFRS 1027, ‘Consolidated and
Separate Financial Statements’.
Samsung Electronics Co., Ltd. (the “Company") was incorporated under the laws of the Republic of Korea to
manufacture and sell semiconductors, LCDs, telecommunication products, and digital media products.
As of December 31, 2010, the Company’s shares are listed on the Korea Stock Exchange. The Company is
domiciled in the Republic of Korea and the address of its registered office is Suwon, the Republic of Korea.
The Company first adopted the International Financial Reporting Standards as adopted by Republic of Korea
("Korean IFRS") from January 1, 2010 (the date of transition: January 1, 2009).
Unless otherwise stated in the footnote, the financial statements have been prepared in accordance with the
historical cost model.
The principles used in the preparation of these financial statements are based on Korean IFRS and
interpretations effective as of December 31, 2010 or standards that will be enforceable after December 31,
2010 but which the Company has decided to early adopt.
Principal adjustments made by the Company in restating its previously published financial statements in
accordance with generally accepted accounting principle in the republic of Korea ("Korean GAAP") are
described in Note 3. The principal accounting policies applied in the preparation of these financial statements
are set out below. These standards have been consistently applied to 2009 comparative financial information
presented.
The Company prepares its financial statements in accordance with International Financial Reporting
Standards as adopted by Korea ("Korean IFRS"). These are those standards, subsequent amendments and
related interpretations issued by the IASB that have been adopted by Korea.
First-time adoption of Korean IFRS is set out under Korean IFRS 1101, First-time Adoption of International
Financial Reporting. Korean IFRS 1101 requires application of the same accounting policies to the opening
statement of financial position and for the periods when the first comparative financial statements are
disclosed. In addition, mandatory exceptions and optional exemptions which have been applied by the
Company are described in Note 3.
There are a number of standards, amendments and interpretations, which have been issued but not yet come
into effect. The Company does not expect that the adoption of these new standards, interpretations and
amendments will have a material impact on the financial condition and results of operations.
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
New standards, amendments and interpretations issued but not effective for the financial year
beginning January 1, 2010 and not early adopted
The Company’s assessment of the impact of these new standards and interpretations is set out below.
‘Revised IAS 24 (revised), ‘Related party disclosures’. It supersedes IAS 24, ‘Related party disclosures’. IAS
24 (revised) is mandatory for periods beginning on or after January 1, 2011. Earlier application, in whole or
in part, is permitted. The Company will apply the revised standard from January 1, 2011. When the revised
standard is applied, the Company and the parent will need to disclose any transactions between its
subsidiaries and its associates. It is, therefore, not possible at this stage to disclose the impact, if any, of the
revised standard on the related party disclosures.
‘Classification of rights issues’ (amendment to IAS 32). The amendment applies to annual periods beginning
on or after February 1, 2010. Earlier application is permitted. The amendment addresses the accounting for
rights issues that are denominated in a currency other than the functional currency of the issuer. Provided
certain conditions are met, such rights issues are now classified as equity regardless of the currency in which
the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities.
The amendment applies retrospectively in accordance with IAS 8‘Accounting policies, changes in accounting
estimates and errors’. The Company will apply the amended standard from January 1, 2011. It is not expected
to have any impact on the Company or the parent entity’s financial statements.
‘IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’. The interpretation clarifies the
accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing
equity instruments to a creditor of the entity to extinguish all or part of the financial liability (debt for equity
swap). It requires a gain or loss to be recognized in profit or loss, which is measured as the difference
between the carrying amount of the financial liability and the fair value of the equity instruments issued. If
the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be
measured to reflect the fair value of the financial liability extinguished. The Company will apply the
interpretation from January 1, 2011. It is not expected to have any impact on the Company or the parent
entity’s financial statements.
These separate financial statements are prepared in accordance with Korean IFRS 1027, ‘Consolidated and
Separate Financial Statements’. Samsung Electronics Co., Ltd., the parent company, has 128 subsidiaries
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
including S-LCD and Samsung Electronics America, and 23 associates and joint ventures including Samsung
SDI.
Investments in subsidiaries, associates, and joint ventures are recognized by cost method in accordance with
Korean IFRS 1027. (Note 3)
Items included in the financial statements of the Company are measured using the currency of the primary
economic environment in which the Company operates (‘the functional currency’). The financial statements
are presented in Korean Won, which is the functional currency of the company.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing
at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at the end of the reporting period
of monetary assets denominated in foreign currencies are recognized in the statement of income, except
when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Changes in the fair value of monetary securities denominated in foreign currency classified as available for
sale financial assets are analyzed between translation differences resulting from changes in the amortized
cost of the security and other changes in the carrying amount of the security. Translation differences related
to changes in amortized cost are recognized in profit or loss, and other changes in carrying amount are
recognized in other comprehensive income.
Translation differences on non-monetary financial assets such as equities held at fair value through profit or
loss are recognized in profit or loss as part of the fair value gain or loss. Translation differences on non-
monetary financial assets such as equities classified as available for sale are included in other comprehensive
income.
The Company considers all highly liquid investments with less than three months maturity from the date of
acquisition to be cash equivalents. Bank overdrafts are considered as short-term borrowings in the statement
of financial position.
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
1) Classification
The Company classifies its financial assets in the following categories: at fair value through profit or loss,
loans and receivables, available-for-sale, and held-to- maturity investments. The classification depends on
the terms of the instruments and purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition.
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are
also categorised as held for trading unless they are designated as hedges. Assets in this category are
classified as current assets.
Loans and receivables are non derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets, except for those with maturities greater than
12 months after the end of the reporting period; such loans and receivables are classified as non-current
assets.
Available-for-sale financial assets are non derivatives that are either designated in this category or not
classified in any of the other categories. They are included in non-current assets unless an investment
matures or management intends to dispose of it within 12 months of the end of the reporting period.
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and
fixed maturity that an entity has the positive intention and ability to hold to maturity. Held-to-maturity
financial assets are included in non-current assets, except for those with maturities less than 12 months from
the end of the reporting period, which are classified as current assets.
Regular purchases and sales of financial assets are recognized on the trade date – the date on which the
Company commits to purchase or sell the asset. Investments are initially recognized at fair value plus
transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried
at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in
the statement of income. Financial assets are derecognized when the rights to receive cash flows from the
investments have expired or have been transferred and the Company has transferred substantially all risks
and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are
subsequently carried at amortized cost using the effective interest method.
Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or
loss category are presented in the statement of income in the period in which they arise. Dividend income
from financial assets at fair value through profit or loss is recognized in the statement of income when the
Company’s right to receive payments is established.
Equity instruments of which the fair value cannot be measured reliably are recognized as cost. Changes in
the fair value of monetary securities denominated in a foreign currency and classified as available for sale
are analysed between translation differences resulting from changes in amortised cost of the security and
other changes in the carrying amount of the security. The translation differences on monetary securities are
recognised in profit or loss; translation differences on non-monetary securities are recognised in other
comprehensive income. Changes in the fair value of monetary and non-monetary securities classified as
available for sale are recognised in other comprehensive income.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments
previously recognized in equity are transferred to the statement of income. Interest on available-for-sale
financial assets calculated using the effective interest method is recognized in the statement of income as part
of finance income. Dividends on available-for sale equity instruments are recognized in the statement of
income as part of other operating income when the Company’s right to receive payments is established.
Financial assets and liabilities are offset and the net amount reported in the statement financial position when
there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis, or realize the asset and settle the liability simultaneously.
The Company assesses at the end of each reporting period whether there is objective evidence that a
financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is
impaired and impairment loss is incurred only if there is objective evidence of impairment as a result of one
or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or
events) has an impact on the estimated future cash flows of the financial asset or group of financial assets
that can be reliably estimated.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted
at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the
amount of the loss is recognized in thestatement of income. As a practical expedient, the Company may
measure impairment on the basis of an instrument’s fair value using an observable market price.
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized (such as an improvement in the
debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the
statement of income.
The Company assesses at the end of each reporting period whether there is objective evidence that a
financial asset or a group of financial assets is impaired. In the case of equity investments classified as
available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also
evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the
cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognized in profit or loss – is removed from equity and
recognized in the statement of income. Impairment losses on equity instruments recognized in the statement
of income are not reversed through the statement of income. If, in a subsequent period, the fair value of a
debt instrument classified as available-for-sale increases and the increase can be objectively related to an
event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed
through the statement of income.
Trade receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of
the Company if longer), they are classified as current assets. If not, they are presented as noncurrent assets.
Non-current trade receivables are recognized initially at fair value and subsequently measured at amortized
cost using the effective interest method, less provision for impairment.
In the event of sale of receivables and factoring, the Company derecognizes receivables when the Company
has given up control or continuing involvement.
2.8 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the average cost
method, except for materials-in-transit. The cost of finished goods and work in progress comprises design
costs, raw materials, direct labor, other direct costs and related production overheads (based on normal
operating capacity). It excludes costs of idle plant, and abnormal waste. Net realizable value is the estimated
selling price in the ordinary course of business, less applicable variable selling expenses.
Inventories are reduced for the estimated losses arising from excess, obsolescence, and the decline in value.
This reduction is determined by estimating market value based on future customer demand. The losses on
inventory obsolescence are recorded as part of cost of sales.
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment
losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow into the Company
and the cost of the item can be measured reliably.
Capitalized interest is added to the cost of the underlying assets. The acquisition cost of property, plant and
equipment acquired under a finance lease is determined at the lower of the present value of the minimum
lease payments and the fair market value of the leased asset at the inception of the lease. Property, plant and
equipment acquired under a finance lease, leasehold improvements are depreciated over the shorter of the
lease term or useful life.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate
their cost to their residual values over their estimated useful lives, as follows:
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are
determined by the difference between the proceeds and the carrying amount and are recognized within the
statement of income.
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost
less accumulated impairment losses. Goodwill related to acquisition of associates and joint ventures is
included in the respective investments.
The Company capitalizes certain development costs when outcome of development plan is for practical
enhancement, probability of technical and commercial achievement for the development plans are high, and
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
the necessary cost is reliably estimable. Capitalized costs, comprising of direct labor and related overhead,
are amortized by straight-line method over their useful lives. In presentation, accumulated amortization
amount and accumulated impairment amount are deducted from capitalized costs associated with
development activities.
Patents, trademarks, software licenses for internal use are capitalized and amortized using straight-line
method over their useful lives, generally 5 to 10 years. Certain club membership is regarded as having an
indefinite useful life because there is no foreseeable limit to the period over which the asset is expected to
generate net cash inflows for the entity; such asset is not amortized. Where an indication of impairment
exists, the carrying amount of any intangible asset is assessed and written down to its recoverable amount.
Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested
annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at each reporting date.
2.12 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs. Borrowings are subsequently
measured at amortized cost; any difference between cost and the redemption value is recognized in the
statement of income over the period of the borrowings using the effective interest method. If the Company
has an indefinite right to defer payment for a period longer than 12 months after the end of the reporting
date, such liabilities are recorded as non-current liabilities. Otherwise, they are recorded as current liabilities.
The Company has defined benefit plans. A defined benefit plan is all pension plans that is not a defined
contribution plan, which the Company pays fixed contributions into a separate entity. Typically defined
benefit plans define an amount of pension benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and compensation.
The liability recognized in the statement financial position in respect of defined benefit pension plans is the
present value of the defined benefit obligation at the end of the reporting period less the fair value of plan
assets, together with adjustments for unrecognized past-service costs. The defined benefit obligation is
calculated annually by independent actuaries using the projected unit credit method. The present value of the
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NOTES TO THE SEPARATE FINANCIAL STATEMENTS
defined benefit obligation is determined by discounting the estimated future cash outflows using interest
rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid,
and that have terms to maturity approximating to the terms of the related pension liability.
Actuarial gains and losses are recognized using the corridor approach. The Company recognizes actuarial
gains and losses in excess of a de minimis over the remaining working lives of employees. The de minimis
amount, which is also referred to as the ‘corridor limit’, is the greater of ten per cent of the present value of
the defined benefit obligation at the end of the previous reporting period (before deducting plan assets) and
ten per cent of the fair value of any plan assets at that date.
The Company recognizes a liability and an expense for bonuses and profit-sharing, based on a formula that
takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The
Company recognizes a provision where contractually obliged or where there is a past practice that has
created a constructive obligation.
2.14 Provisions
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement
is determined by considering the class of obligations as a whole.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest
expense.
When there is a probability that an outflow of economic benefits will occur due to a present obligation
resulting from a past event, and whose amount is reasonably estimable, a corresponding amount of provision
is recognized in the financial statements. However, when such outflow is dependent upon a future event, is
not certain to occur, or cannot be reliably estimated, a disclosure regarding the contingent liability is made in
the notes to the financial statements.
2.15 Leases
The Company leases certain property, plant and equipment. Lease of property, plant and equipment where
the Company has substantially all the risks and rewards of ownership are classified as finance leases.
Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased
property and the present value of the minimum lease payments. Each lease payment is allocated between the
liability and finance charges so as to achieve a constant rate on the outstanding balance. The corresponding
rental obligations, net of finance charges, are included in other long-term payables. The interest element of
the finance cost is charged to the statement of income over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. The property, plant and
equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the
lease term.
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Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases and are therefore not reflected on the statement of financial position as asset.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the
statement of income on a straight-line basis over the period of the lease.
All derivative instruments are accounted for at fair value with the resulting valuation gain or loss recorded as
an asset or liability. If the derivative instrument is not designated as a hedging instrument, the gain or loss is
recognized in the statement of income in the period of change.
Fair value hedge accounting is applied to a derivative instrument with the purpose of hedging the exposure to
changes in the fair value of an asset or a liability or a firm commitment (hedged item) that is attributable to a
particular risk. Hedge accounting is applied when the derivative instrument is designated as a hedging
instrument and the hedge accounting criteria have been met. The gain or loss, on both the hedging derivative
instrument and the hedged item attributable to the hedged risk, is reflected in the statement of income.
The Company uses the fair-value method in determining compensation costs of stock options granted to its
employees and directors. The compensation cost is estimated using the Black-Scholes option-pricing model
and is accrued and charged to expense over the vesting period, with a corresponding increase in a separate
component of equity.
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and
services in the ordinary course of the Company’s activities. Revenue is shown net of value-added tax,
returns, rebates and discounts and after eliminating sales within the Company.
The Company recognizes revenue when specific recognition criteria have been met for each of the
Company’s activities as described below. The Company bases its estimates on historical results, taking into
consideration the type of customer, the type of transaction and the specifics of each arrangement.
Sales of products and merchandise are recognized upon delivery when the significant risks and rewards of
ownership of goods have transferred to the buyer, continuing managerial involvement usually associated
with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is
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probable that the economic benefits associated with the transaction will flow to the Company and the costs
incurred or to be incurred in respect of the transaction can be measured reliably. The Company records
reductions to revenue for special pricing arrangements, price protection and other volume based discounts. If
product sales are subject to customer acceptance, revenue is not recognized until customer acceptance
occurs.
Revenues from rendering services are generally recognized using the percentage-of-completion method,
based on the percentage of costs to date compared to the total estimated costs, contractual milestones or
performance.
The Company enters into transactions involving multiple components consisting of any combination of
goods, services, etc. The commercial effect of each separately identifiable component of the transaction is
evaluated in order to reflect the substance of the transaction. The consideration received from these
transactions is allocated to each separately identifiable component based on the relative fair value of each
component. The Company determines the fair value of each component by taking into consideration factors
such as the price when component or a similar component is sold separately by the Company or a third party.
Interest income is recognized using the effective interest method. When a loan and receivable is impaired,
the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow
discounted at the original effective interest rate of the instrument, and continues unwinding the discount as
interest income. Royalty income is recognized on an accruals basis in accordance with the substance of the
relevant agreements. Dividend income is recognized when the right to receive payment is established.
Grants from the government are recognized at their fair value where there is a reasonable assurance that the
grant will be received and the Company will comply with the conditions attached. Government grants
relating to income are deferred and recognized in the statement of income over the period necessary to match
them with the income that they are intended to compensate. Government grants relating to property, plant
and equipment are included in non-current liabilities as deferred government grants and are credited to the
statement of income on a straight-line basis over the expected lives of the related assets.
The tax expense for the period comprises current and deferred tax. Tax is recognized in the statement of
income, except to the extent that it relates to items recognized in other comprehensive income or directly in
equity. In this case the tax is also recognized in other comprehensive income or directly in equity,
respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the balance sheet date in the countries where the company’s subsidiaries and associates operate and generate
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taxable income. Management periodically evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantively enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will
be available against which the temporary differences can be utilized.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to
income taxes levied by the same taxation authority on either the taxable entity or different taxable entities
where there is an intention to settle the balances on a net basis.
Basic earnings per share is calculated by dividing net profit for the period available to common shareholders
by the weighted-average number of common shares outstanding during the year.
Diluted earnings per share is calculated using the weighted-average number of common shares outstanding
adjusted to include the potentially dilutive effect of common equivalent shares outstanding.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker is responsible for making strategic decisions
on resource allocation and performance assessment of the operating segments.
The preparation of these separate financial statements require management to exercise significant judgment
and assumptions based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal corresponding actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are addressed below.
24
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The Company uses the percentage-of-completion method in accounting for its fixed-price contracts to
deliver installation services. Use of the percentage-of-completion method requires the Company to estimate
the services performed to date as a proportion of the total services to be performed. Revenues and earnings
are subject to significant change, affected by beginning steps in long-term projects, change in scope of a
project, cost, period, and plans of the customers.
The Company recognizes provision for warranty at the point of recording related revenue. The Company
accrues provision for warranty based on the best estimate of amounts necessary to settle future and existing
claims on products sold as of each balance sheet date. Continuous release of products that are more
technologically complex and changes in local regulations and customs could result in additional allowances
being required in future periods.
The Company tests at the end of each reporting period whether goodwill has suffered any impairment in
accordance with the accounting policy described in Note 2.11. The recoverable amounts of cash generating
units have been determined based on value-in-use calculations. These calculations require the use of
estimates.
Legal proceedings covering a wide range of matters are pending or threatened in various jurisdictions
against the Company. Provisions are recorded for pending litigation when it is determined that an
unfavorable outcome is probable and the amount of loss can be reasonably estimated. Due to the inherent
uncertain nature of litigation, the ultimate outcome or actual cost of settlement may materially vary from
estimates.
The Company operates primarily in Korean Won and its official accounting records are maintained in
Korean Won. The U.S. dollar amounts provided in the financial statements represent supplementary
information solely for the convenience of the reader. All won amounts are expressed in U.S. dollars at the
rate of ₩1,138.90 to US $1, the exchange rate in effect on December 31, 2010. Such presentation is not in
accordance with generally accepted accounting principles, and should not be construed as a representation
that the Won amounts shown could be readily converted, realized or settled in U.S. dollars at this or at any
other rate.
2.26 These separate financial statements were approved by the Board of Directors on January 28, 2011.
25
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
3. Transition to International Financial Reporting Standards as adopted by the Republic of Korea from
Generally Accepted Accounting Principle in the Republic of Korea.
The Company adopted Korean IFRS from the fiscal year 2010 (the date of first-time adoption to Korean
IFRS: January 1, 2010). The comparison year, 2009,is restated in accordance with Korean IFRS 1101, First-
time adoption of international financial reporting standards (the date of transition to Korean IFRS: January
1, 2009).
The Company elected the following exemptions upon the adoption of Korean IFRS in accordance with
Korean IFRS 1101, First-time adoption of international financial reporting standards:
1) Business combination: Past business combinations that occurred before the date of transition to Korean
IFRS will not be retrospectively restated under Korean IFRS 1103, Business combinations.
2) Fair value as deemed cost: The Company elects to measure certain land assets at fair value at the date of
transition to Korean IFRS and use the fair value as its deemed cost. Valuations were made on the basis of
recent market transactions on the arm's length terms by independent valuers.
3) Investments for subsidiaries, associates and joint ventures of the separate financial statements are reset to
the book value under the Korean GAAP as of the date of transition to Korean IFRS.
4) Employee benefits: The Company elected to use the ‘corridor’ approach for actuarial gains and losses and
all cumulative actuarial gains and losses have been recognized at the date of transition to Korean IFRS.
Under Korean GAAP, the Company elected to measure investments for subsidiaries, associates and joint
ventures at equity-method, whereas under Korean IFRS the Company elects cost method on the separate
financial statements.
Employees and directors with at least one year of service are entitled to receive a lump-sum payment upon
termination of their employment with the Company, based on their length of service and rate of pay at the
time of termination. Under the previous severance policy pursuant to Korean GAAP, Accrued severance
benefits represented the amount which would be payable assuming all eligible employees and directors were
to terminate their employment as of the end of the reporting period. However, under Korean IFRS, the
26
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
liability is determined based on the present value of expected future payments calculated and reported using
actuarial assumptions.
Under Korean GAAP the Company recorded expenditures related to research and development activities as
current expense. Under Korean IFRS if such costs related to development activities meet certain criteria they
are recorded as intangible assets.
Under Korean GAAP, the Company amortizes goodwill or recognizes a gain in relation to bargain purchase
(negative goodwill1) acquired as a result of business combinations on a straight-line method over five years
from the year of acquisition. Under Korean IFRS, goodwill is not amortized but reviewed for impairment
annually. Bargain purchase is recognized immediately in the statement of income. The impact of this
adjustment is included within “other” adjustment in the tables below.
1
Negative goodwill under Korean GAAP is referred to as bargain purchase under Korean IFRS
Under Korean GAAP, when the Company transferred a financial asset to financial institutions and it was
determined that control over the asset has been transferred the Company derecognized the financial asset.
Under Korean IFRS, if the Company retains substantially all the risks and rewards of ownership of the asset,
the asset is not derecognized but instead the related cash proceeds are recognized as financial liabilities.
Under Korean GAAP, deferred tax assets and liabilities were classified as either current or non-current based
on the classification of their underlying assets and liabilities. If there are no corresponding assets or
liabilities, deferred tax assets and liabilities were classified based on the periods the temporary differences
were expected to reverse. Under Korean IFRS, deferred tax assets and liabilities are all classified as non-
current on the statement of financial position.
In addition, there is a difference between Korean IFRS and Korean GAAP in terms of recognition of
deferred tax assets or liabilities relating to investments in subsidiaries. Under Korean GAAP there is specific
criteria as to when deferred tax assets and liabilities relating to investments in subsidiaries should be
recognized as a whole, whereas under Korean IFRS, the related deferred tax assets or liabilities are
recognized according to sources of reversal of the temporary differences.
The Company elects to measure investments for subsidiaries, associates and joint ventures at cost model on
the separated financial statements. As a result, there is no valuation of deferred tax assets or liabilities related
to the investments after the date of transition to Korean IFRS.
27
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The effects of the adoption of Korean IFRS on financial position, Comprehensive income and cash
flows of the Company
(a) Adjustments to the statement of financial position as of the date of transition, January 1, 2009.
(b) The effect of the adoption of Korean IFRS on financial position and comprehensive income of the
Company as of and for the year ended December 31, 2009.
Comprehensive
(In millions of Korean Won) Asset Liabilities Equity
income
Korean GAAP ₩ 86,024,154 ₩ 19,199,443 ₩ 66,824,711 ₩ 9,116,540
Adjustments:
Fair valuation of land (*) 3,804,404 924,525 2,879,879 (9,273)
Derecognition of financial asset 3,579,760 3,579,760 - -
Capitalization of development costs 214,451 - 214,451 13,973
Pension and compensated absence - 175,702 (175,702) 27,269
Deferred tax on investments in equity
(854,084) (1,033,936) 179,852 253,535
and reclassification to non-current
Equity method cancellation
(3,159,331) - (3,159,331) (3,095,399)
and dividend income
Tax-effect on adjustments - 9,394 (9,394) (9,381)
Total 3,585,200 3,655,445 (70,245) (2,819,276)
Korean IFRS ₩ 89,609,354 ₩ 22,854,888 ₩ 66,754,466 ₩ 6,297,264
(*) The adjustment includes the effect of deferred tax
28
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
(c) Adjustments to the statement of cash flows for the year ended December 31, 2009
According to Korean IFRS 1007, Cash Flow Statements, cash flows from interest, dividends received and taxes
on income shall each be disclosed separately. The comparison year, 2009, is restated in accordance with Korean
IFRS. There are no other significant differences between cash flows under Korean IFRS and those under
previous Korean GAAP for the year ended December 31, 2009.
Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term highly
liquid investments with original maturities of less than three months.
Short-term financial instruments subject to withdrawal restrictions as of December 31, 2010, 2009 and January 1,
2009, consist of the following:
Assets
Cash and cash
Equivalents ₩ - ₩ 1,826,362 ₩ - ₩ 1,826,362 ₩ 1,826,362
Short -term financial
instruments - 10,930,660 - 10,930,660 10,930,660
Available-for-sale
financial assets - - 3,849,963 3,849,963 3,849,963
Trade and other
receivables - 14,986,876 - 14,986,876 14,986,876
Other financial
assets (*) 66,129 1,574,746 - 1,640,875 1,640,875
Total ₩ 66,129 ₩29,318,644 ₩3,849,963 ₩33,234,736 ₩ 33,234,736
29
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Financial liabilities
measured at Fair value
amortized cost
Liabilities
Trade and other payables ₩ 11,915,509 ₩ 11,915,509
Short-term borrowings 4,415,095 4,415,095
Current portion of long-term
borrowings and debentures 5,459 5,459
Non-current Debentures 87,338 87,338
Other financial liabilities** 5,712,022 5,712,022
Total ₩ 22,135,423 ₩ 22,135,423
Assets at fair
Available-for-
value through Loans
sale financial Total Fair value
the profit and and receivables
assets
loss
Assets
Cash and cash
equivalents ₩ - ₩ 2,142,220 ₩ - ₩ 2,142,220 ₩ 2,142,220
Short - term finance
instruments - 8,196,850 - 8,196,850 8,196,850
Available for sale
financial assets - - 3,413,095 3,413,095 3,413,095
Trade and other
receivables - 11,257,986 - 11,257,986 11,257,986
Other financial
Assets(*) 8,982 1,144,690 - 1,153,672 1,153,672
Total ₩ 8,982 ₩22,741,746 ₩3,413,095 ₩26,163,823 ₩26,163,823
30
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Financial liabilities
measured at Fair value
amortized cost
Liabilities
Trade and other payables ₩ 9,381,208 ₩ 9,381,208
Short-term borrowings 3,579,760 3,579,760
Current portion of long-term
borrowings and debentures 5,588 5,588
Non-current portion of Debentures 94,993 94,993
Other financial liabilities** 5,112,207 5,112,207
Total ₩ 18,173,756 ₩ 18,173,756
Assets at fair
Available-for-
value through Loans
sale financial Total Fair value
the profit and and receivables
assets
loss
Assets
Cash and cash
equivalents ₩ - ₩ 2,360,190 ₩ - ₩ 2,360,190 ₩ 2,360,190
Short - term finance
instruments - 3,306,326 - 3,306,326 3,306,326
Available for sale
financial assets - - 2,110,920 2,110,920 2,110,920
Trade and other
receivables - 7,699,795 - 7,699,795 7,699,795
Other financial
assets(*) - 1,069,430 - 1,069,430 1,069,430
Total ₩ - ₩ 14,435,741 ₩2,110,920 ₩16,546,661 ₩16,546,661
31
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Financial liabilities
measured at Fair value
amortized cost
Liabilities
Trade and other payables ₩ 6,175,535 ₩ 6,175,535
Short-term borrowings 3,488,144 3,488,144
Current portion of long-term
borrowings and debentures 6,009 6,009
Non-current portion of Debentures 108,170 108,170
Other financial liabilities** 3,336,876 3,336,876
Total ₩ 13,114,734 ₩ 13,114,734
(*) Other financial assets consist of amounts included in other current assets, deposits, and other non-current
assets in the statement of financial position, and do not include investments in joint-ventures and associated
companies.
(**) Other financial liabilities consist of amounts included in accrued expenses, long term trade and other
payables, other current and non-current liabilities and withholdings, excluding items which are non-financial.
The following table presents the assets and liabilities that are measured at fair value at 31 December 2010.
The following table presents the assets and liabilities that are measured at fair value at 31 December 2009.
32
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The following table presents the assets and liabilities that are measured at fair value at January 1, 2009.
The levels of the fair value hierarchy and its application to financial assets and liabilities are described
below :
ㆍLevel 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities
ㆍLevel 2 : Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly or indirectly
ㆍLevel 3 : Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs)
The fair value of financial instruments traded in active markets is based on quoted market prices at the
balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent
actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used
for financial assets held by the group is the current bid price. These instruments are included in level 1.
Instruments included in level 1 comprise primarily listed equity investments classified as trading securities or
available-for-sale.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of
observable market data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in
level 3.
33
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
ㆍ Other techniques, such as discounted cash flow analysis, are used to determine fair value for the
remaining financial instruments. As for trade and other receivables, the book value approximates a
reasonable estimate of fair value.
Short-term available-for-sale financial assets as of December 31, 2010, 2009 and January 1, 2009, consist of
beneficiary certificates whose maturities are within 1 year, and beneficiary certificates consist of the following
For the years ended December 31, 2010 and 2009, changes in valuation gain on short-term available-for-sale
securities are as follows:
34
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Long-term available-for-sale financial assets as of December 31, 2010, 2009 and January 1, 2009, consist of
the following:
2010 2009 2009. 1. 1
Acquisition Recorded Recorded Recorded
(In millions of Korean Won) Detail Cost Book Value Book Value Book Value
Government and public bonds and others 39,668 39,668 30,487 487
₩ 751,687 ₩ 2,690,819 ₩ 1,308,675 ₩ 1,128,853
1
Excludes associates and joint ventures.
² The Company measures available-for-sale financial assets, at their fair values. For an investment in equity
instruments that do not have a quoted market price in an active market and its fair value cannot be measured
reliably, it is measured at cost.
1) Listed equities
Listed equities as of December 31, 2010, 2009 and January 1, 2009, consist of the following:
(In millions of Korean Won, except for the number of shares and percentage)
¹ Certain investees including iMarket Korea and INPHI, were listed on Korea Exchange or New York Stock
Exchange during the current year.
35
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The differences between the acquisition cost and fair value of the investment is recorded under other
reserves, a separate component of equity.
2) Non-listed equities
Non-listed equities as of December 31, 2010, 2009 and January 1, 2009, consist of the following:
(In millions of Korean Won, except for the number of shares and percentage)
Impairment losses on non-listed equities resulting from the decline in realizable value below the acquisition
cost amounted to ₩10,719 million for the year ended December 31, 2010.
As of December 31, 2010, the Company’s investments in Pusan Newport are pledged as collateral against
the investee's debt
For the years ended December 31, 2010 and 2009, changes in valuation gain on long-term available-for-sale
securities are as follows:
36
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Substantially all current trade and other receivables are due within 1 year from the end of the reporting period.
The carrying amount is a reasonable approximation of fair value for current trade and other receivables, with
effect of discount being insignificant.
Trade and other receivables of December 31, 2010, 2009 and January 1, 2009, consist of the following:
The Company transferred receivable balances to financial institutions in exchange for cash. The outstanding
balance of transferred receivable balances amounting to ₩4,415,095 million, ₩3,579,760 million and
₩3,488,144 million has been accounted for as borrowings as of December 31, 2010, 2009 and January 1,
2009.
37
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The Company does not consider receivables that are overdue for less than or equal to 31 days as impaired.
Trade and other receivables that are overdue for less than or equal to 31 days are as follows:
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable
mentioned above. As of December 31, 2010, the Company has credit insurance with Korea Trade Insurance and
overseas insurance companies against its export accounts receivables from approved foreign customers.
9. Inventories
Inventories, net of valuation losses, as of December 31, 2010, 2009 and January 1, 2009, consist of the
following:
As of December 31, 2010, losses from valuation of inventories amounted to ₩427,920 million (December
31, 2009: ₩270,947 million, January 1, 2009: ₩424,689 million).
Associates and Joint Ventures as of December 31, 2010, consist of the following:
1
Others consist of dividends and effect of changes in foreign exchange rates. For the year ended December 31,
2010, it also includes effects from the combination of Samsung SDS and Samsung Networks.
38
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Changes in property, plant and equipment for the years ended December 31, 2010 and 2009, consist of the
following:
39
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Changes in intangible assets for the years ended December 31, 2010 and 2009, are as follows:
(*) The amount includes intangible assets and goodwill arising from the business combination with Samsung
Digital Imaging.
(**) The impairment charge of ₩153,940 million relates to Samsung Digital Imaging, and is a result of a
decline in profitability and increased market competitiveness that occurred in the fourth quarter of 2010.
40
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The amortization expense of intangible assets for the years ended December 31, 2010 and 2009, is
allocated to the following accounts:
Goodwill was allocated to each cash-generating unit. The recoverable amounts of cash generating units
have been determined based on value-in-use calculations. The Company has performed impairment test for
goodwill annually. The revenue growth rate and discount rate associated with future cash flows were the
major assumptions. The majority of goodwill as of December 31, 2010 relates to the business combination
with Samsung Digital Imaging. For this goodwill, the discount rate used to present value cash flows of the
cash-generating unit as of December 31, 2010 was 15.23%. The revenue growth rate was based on the
Company’s forecast for the next five years, and its range was 2.5%. The Company determines its revenue
growth rate based on historical performance and its expectation for market conditions. The applied
weighted average growth rate is consistent with industry reports.
13. Borrowings
Borrowings as of December 31, 2010, 2009 and January 1, 2009, consist of the following:
Collateralized borrowings Woori Bank, etc. 1.1 ~ 1.4 ₩ 4,415,095 ₩ 3,579,760 ₩ 3,488,144
14. Debentures
41
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Debentures as of December 31, 2010, 2009 and January 1, 2009, consist of the following:
US dollar
denominated straight 7.7 ₩ 96,807 ₩ 105,084 ₩ 119,463
bonds 1997.10.2 2027.10.1 (USD 85M) (USD 90M) (USD 95M)
Less: Discounts (4,010) (4,503) (5,284)
US dollar straight bonds will be repaid annually for twenty years after a ten-year grace period from the date of
issuance. Interests will be paid semi-annually.
2011 ₩ 5,695
2012 5,695
2013 5,695
2014 5,695
Thereafter 74,027
₩ 96,807
42
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The Company operates defined pension plans in various subsidiaries according to their local regulations and
practices in each country. The amounts recognized in the statement of financial position as of December 31,
2010, 2009 and January 1, 2009, are as follows:
Expense details for defined benefit plans recognized in the statement of income for the years ended
December 31, 2010 and 2009, consist of the following:
Expected contributions to retirement benefit plans for the year ending December 31, 2011 are ₩317,101
million
The pension expense related to defined-benefit plans recognized in the statement of income for the years
ended December 31, 2010 and 2009, is allocated to the following accounts:
43
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Change in the defined benefit obligation for the years ended December 31, 2010 and 2009, is as follows
(In millions of Korean Won)
2010 2009
Balance at the beginning of the year ₩ 1,997,519 ₩ 2,021,627
Current service cost 358,095 363,752
Interest cost 129,555 131,547
Actuarial gains and losses 178,595 (56,958)
Benefits paid (488,961) (422,552)
Others 29,465 (39,897)
Balance at the end of the year ₩ 2,204,268 ₩ 1,997,519
Change in the fair value of plan assets for the years ended December 31, 2010 and 2009, is as follows
(In %)
2010 2009 2009. 1. 1
Discount rate 6.5 7.5 7.5
Expected return on plan assets 5.0 5.0 5.0
Future salary increases
5.9 7.0 7.0
(including inflation)
The expected return on plan assets is based on the expected return multiplied with the respective percentage
weight of the market-related value of plan assets. The expected return is defined on a uniform basis,
reflecting long-term historical returns, current market conditions and strategic asset allocation.
44
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The actual returns on plan assets for the years ended December 31, 2010 and 2009, were as follows:
16. Provisions
The changes in the main liability provisions during the 12 month period ended December 31, 2010, are as
follows:
Long-term
244,443 389,079 42,810 590,712
incentives (C)
Total ₩1,848,778 ₩2,078,143 ₩2,305,413 ₩1,621,508
(A) The Company accrues warranty reserves for estimated costs of future service, repairs and recalls, based
on historical experience and terms of warranty programs (which have terms from 1 to 4 years).
(B) The Company makes provisions for estimated royalty expenses related to technical assistance
agreements that have not been settled. The timing of payment depends on the settlement of agreement.
(C) The Company has a long-term incentive plans for its executives based on a three-year management
performance criteria and has made a provision for the estimated incentive cost for the accrued period.
45
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
(A) Guarantees
Guarantees of debt for overseas US$ 5,555 US$ 4,655 US$ 4,323
subsidiaries (In KRW: ₩ 6,326,795) (In KRW: ₩ 5,435,178) (In KRW: ₩ 5,436,173)
(Up to the limit)
Guarantees of debt for overseas US$ 2,412 US$ 1,401 US$ 2,297
subsidiaries (In KRW: ₩ 2,747,064) (In KRW: ₩ 1,635,456) (In KRW: ₩ 2,888,688)
(Actual indebtedness)
(*) The guarantees of debt for housing rental relate to guarantees provided by the Company to landlords for
housing for expatriate employees.
As of December 31, 2010, the Company is providing a ₩23,414 million (HUF 43.2 billion) guarantee for
Samsung Electronics Hungarian relating to the investment incentive contract with the Hungarian
government.
(B) Lease
As of December 31, 2010, details of lease contracts held by the Company are as follows:
Finance lease
The Company has finance lease agreement with its subsidiary, SLCD providing land and building.
The minimum lease payments under finance lease agreements and their present value as of December 31,
2010 and 2009 are as follows:
46
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Operating lease
The Company has finance lease agreement with its subsidiary, SLCD providing land and building.
The book value of operating lease assets under operating lease agreements as of December 31, 2010 and
2009, are as follows:
(In millions of Korean Won)
2010 2009 2009.1.1
Land Building Land Building Land Building
Acquisition
₩45,757 ₩1,312,095 ₩ 45,238 ₩ 1,400,520 ₩ 32,156 ₩ 739,072
cost
Accumulated
- (354,011) - (283,456) - (163,688)
depreciation
Total ₩45,757 ₩ 958,084 ₩ 45,238 ₩ 1,117,064 ₩ 32,156 ₩ 575,384
The minimum lease payments under operating lease agreements and their present value as of December 31,
2010 and 2009 are as follows:
(In millions of Korean Won) 2010 2009 2009.1.1
Minimum Minimum Minimum
Lease lease Lease
payments payments payments
Within one year ₩ 125,397 ₩ 126,565 ₩ 92,624
From one year to five years 305,750 386,041 142,454
More than five years 33,246 84,387 -
Total ₩ 464,393 ₩ 596,993 ₩ 235,078
The recognized amount of present value adjustment in Statements of Income is ₩189,827 million,
₩174,598million as of December 31, 2010 and 2009.
(C) Litigation
A. Civil class actions with respect to fixed pricing on the sales of TFT-LCD were filed against the
Company and its subsidiaries in the United States. As of balance sheet date, the outcome of the
investigation and civil actions cannot be reasonably determined, the Company has not recorded any
liability for these matters in the financial statements.
B. Based on the agreement entered into on August 24, 1999 with respect to Samsung Motor Inc.’s
(“SMI”) bankruptcy proceedings, Samsung Motor Inc.’s creditors (“the Creditors”) filed a civil
action lawsuit against Mr. Kun Hee Lee, chairman of the Company, and 28 Samsung Group
affiliates including the Company under joint and several liability for failing to comply with such
agreement. Under the suit, the Creditors have sought ₩2,450,000 million (approximately
US$1.95 billion) for loss of principal on loans extended to SMI, a separate amount for breach of the
agreement, and an amount for default interest.
47
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
SLI completed its Initial Public Offering (“IPO”) on May 7, 2010. After disposing of 2,277,787 of
the shares donated by Mr. Lee and payment of the principal balance owed to the Creditors,
₩878,000 million (approximately $ 0.80 billion) was deposited in to an escrow account. That
remaining balance was to be used to pay the Creditors interest due to the delay in the SLI IPO. On
January 11, 2011, the Seoul High Court ordered Samsung Group affiliates to pay ₩600,000
million(approximately $ 0.53 billion) to the Creditors and pay 5% annual interest for the period
between May 8, 2010 and January 11, 2011, and pay 20% annual interest for the period after
January 11, 2011 until the amounts owed to the Creditors are paid. In accordance with the Seoul
High Court order, ₩620,400 million (which includes penalties and interest owed) was paid to the
Creditors from the funds held in escrow during January 2011. Samsung Group affiliates and the
Creditors all have appealed to the Korean Supreme Court. The Company has concluded that no
provision for loss related to this matter should be reflected in the Company’s financial statements at
December 31, 2010.
C. As of December 31, 2010, the Company was named as a defendant in legal actions filed by 22
overseas companies including Philips, and as the plaintiff in legal actions against 4 overseas
companies including Spansion Inc. for alleged patent infringements. As the outcome of these
matters cannot be reasonably determined, the Company has not recorded any liability for these
matters in the financial statements at December 31,2010.
D. As of December 31, 2010, the Company was also named as a defendant in legal actions filed by 34
domestic and overseas companies, and as the plaintiff in legal actions against 7 domestic and
overseas companies relating to matters other than alleged patent infringements. The amount claimed
against the Company in these cases totals ₩44,279 million, although in nine of the cases no
amount has yet been claimed and the amount being claimed against other companies totals ₩2,603
million. As the outcome of these matters cannot be reasonably determined, the Company has not
recorded any liability for these matters in the financial statements at December 31, 2010.
The changes in the number of shares outstanding as of December 31, 2010, 2009 and January 1, 2009, are
as follows:
(In millions of Korean Won and number of shares)
Number of Share capital Share premium Total
shares(*)
At 1 January 2009 146,889,642 ₩ 897,514 ₩ 4,403,893 ₩ 5,301,407
Shares issued (**) 1,235,479 - - -
At 31 December 2009 148,125,121 897,514 4,403,893 5,301,407
Shares issued (**) 1,571,690
At 31 December 2010 149,696,811 ₩ 897,514 ₩ 4,403,893 ₩ 5,301,407
(*) As of December 31, 2010 and 2009, and January 1, 2009, 19,853,734 shares of preferred stock were
included in the number of shares.
(**) Treasury stocks were issued with respect to options exercised during 2009 and 2010 and the merger of
Samsung Digital Imaging during 2010.
48
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
1
Common stock with par value of ₩5,000 per share.
2
Non-cumulative, non-voting preferred stock with par value of ₩5,000 per share that were all issued on or
before February 28, 1997 and are entitled to an additional cash dividend of 1% of par value over common
stock.
3
Cumulative, participating preferred stock with par value of ₩5,000 per share entitled to a minimum cash
dividend at 9% of par value.
Convertible securities
The Company is authorized to issue to investors, other than current shareholders, convertible debentures
and debentures with warrants with face values up to ₩4,000,000 million and ₩2,000,000 million,
respectively. The convertible debentures amounting to ₩3,000,000 million and ₩1,000,000 million are
assigned to common stock and preferred stock, respectively. While the debentures with warrants amounting
to ₩1,500,000 million and ₩500,000 million are assigned to common stock and preferred stock,
respectively. As of December 31, 2010, there are no convertible securities currently in issue.
Redemption of shares
The Company is authorized, subject to the Board of Directors’ approval, to retire treasury stock in
accordance with applicable laws up to the maximum amount of certain undistributed earnings. As of
December 31, 2010, 8,310,000 shares of common stock and 1,060,000 shares of non-voting preferred stock
had been retired over three tranches, with the Board of Directors' approval. The par value of capital stock
differs from paid-in capital as the retirement of capital stock was recorded as a deduction from retained
earnings
Issuance of shares
The Company is authorized, subject to the Board of Directors’ approval, to issue shares of common or
preferred stock to investors other than current shareholders for issuance of depository receipts, general
public subscription, urgent financing with financial institutions, and strategic alliance.
a. The Company has issued global depositary receipts (“GDR”) to overseas capital markets. The
number of outstanding GDR as of December 31, 2010, 2009 and January 1, 2009, are as follows:
49
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Outstanding GDR
- Share of Stock 3,253,577 9,049,098 3,519,155 8,921,328 3,402,937 8,661,570
- Share of GDR 6,507,154 18,486,976 7,038,310 17,842,656 6,805,874 17,323,140
a. Retained earnings as of December 31, 2010, 2009 and January 1, 2009, consist of the following:
1
The Commercial Code of the Republic of Korea requires the Company to appropriate as a legal reserve,
an amount equal to a minimum of 10% of annual cash dividends declared, until the reserve equals 50%
of its issued capital stock. The reserve is not available for the payment of cash dividends, but may be
transferred to capital stock through a resolution of the Board of Directors or used to reduce accumulated
deficit, if any, with the ratification of the shareholders.
50
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
b. Statements of Appropriation of Retained earnings for the years ended December 31, 2010, 2009 as
follows (Date of appropriations : March 18, 2011 and March 19, 2010):
Interim dividends
In 2010 - ₩ 5,000 (Dividend rate: 100% )
In 2009 - ₩ 500 (Dividend rate: 10% ) (747,063) (73,507)
Net income 13,236,461 6,208,140
Appropriations
Reserve for business rationalization 3,000,000 1,000,000
Cash dividends
Common stock
In 2010 - ₩ 5,000 (Dividend rate: 100% )
In 2009 - ₩ 7,500 (Dividend rate: 150% )
Preferred stock
In 2010 - ₩ 5,050 (Dividend rate: 101% )
In 2009 - ₩ 7,550 (Dividend rate: 151% ) 749,477 1,111,931
Reserve for research and human resource development 6,000,000 4,000,000
Reserve for capital expenditure 6,568,688 3,464,049
Unappropriated retained earnings
carried over to the subsequent year 30 3,828,797
* The above statements of appropriation of retained earnings for the years ended December 31, 2009
adopted the K-IFRS adjustments. As so, there is difference between the above statements of
appropriation of retained earnings for the year ended December 31, 2009 and the statements of
appropriation of retained earnings for the year ended December 31, 2009, appropriated as of March
19, 2010.
51
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
20. Dividends
The Company declared cash dividends to shareholders of common stock and preferred stock as interim
dividends for the six-month periods ended June 30, 2010 and 2009 and as year-end dividends for the years
ended December 31, 2010 and 2009.
Dividend for the year 2010 will be paid in April, 2011 after approval from the general shareholders’ meeting
scheduled in March, 2011. The dividend for the year 2009 was paid on April 19, 2010. The statements of
financial position as of December 31, 2010 and 2009 do not reflect these dividend payables as they had not
yet been declared as at December 31, 2010 and 2009, respectively.
52
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
2010 2009
Common Preferred Common Preferred
Stock Stock Stock Stock
Dividend yield ratio 1.1% 1.6% 1.0% 1.6%
The average closing price for a week before 2 trading days prior to closing date of shareholders' list.
Other components of equity as of December 31, 2010, 2009 and January 1, 2009, consist of the following:
(*)As of December 31, 2010, the Company holds 17,456,260 common shares and 2,979,693 preferred
shares as treasury stocks.
The Company has a stock option plan that provides for the granting of stock purchase options to employees
or directors who have contributed or are expected to contribute to the management and technological
innovation of the Company. No Share based compensation has been granted since December 20, 2005. All
options currently in issue are fully vested.
53
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
A summary of the terms and the number of outstanding stock options as of December 31, 2010 is as follows:
Exercise price ₩272,700 ₩197,100 ₩329,200 ₩342,800 ₩288,800 ₩580,300 ₩460,500 ₩606,700
Weighted average
share price at the
date of exercise
during 2009 675,010 710,883 708,166 769,943 712,980 765,098 - -
Weighted average share
price at the date of
exercise during 2010 ₩779,377 ₩853,456 ₩845,473 ₩840,201 ₩852,484 ₩863,578 - -
Exercise period from
the date of the grant 3-10years 3-10years 2-10years 2-10years 2-10years 2-10years 2-4years 2-10years
Expenses by nature for the years ended December 31, 2010 and 2009, consist of the following:
54
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Selling, general and administrative expenses for the years ended December 31, 2010 and 2009, consist of the
following:
Other operating income and expenses for the years ended December 31, 2010 and 2009, consist of the
following:
2010 2009
55
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Finance income and expenses for the years ended December 31, 2010 and 2009, consist of the following:
The Company recognizes the profits and losses regarding translation differences as financial income and
expenses
Income tax expense for the years ended December 31, 2010 and 2009 consists of the following:
Current taxes :
Current tax on profits for the year 2,249,854 1,061,387
Adjustments in respect of prior years (27,234) 136,411
₩ 2,222,620 ₩ 1,197,798
Deferred taxes :
Deferred income taxes - tax credit (247,136) (73,415)
Deferred income taxes - temporary difference (176,216) (275,903)
56
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the
weighted average tax rate applicable as follows:
Deferred income tax assets and liabilities resulting from the tax effect of temporary differences including
available tax credit carryforwards as of December 31, 2010, are as follows:
57
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Deferred income tax assets and liabilities resulting from the tax effect of temporary differences including
available tax credit carryforwards as of December 31, 2009, are as follows:
The analysis of deferred tax assets and deferred tax liabilities is as follows
58
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company
by the weighted average number of ordinary shares in issue during the year excluding ordinary shares
purchased by the Company and held as treasury shares.
Basic earnings per share for the years ended December 31, 2010 and 2009, is calculated as follows:
1
Basic earnings per preferred share (in Korean Won)
(In millions, except for share amounts) 2010 2009
Net income available for preferred stock ₩ 1,756,552 ₩ 833,034
Weighted-average number of preferred shares
19,854 19,854
Outstanding (in thousands)
Basic earnings per preferred share (in Korean Won) ₩ 88,473 ₩ 41,958
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category
of dilutive potential ordinary shares: Stock options. A calculation is done to determine the number of shares
that could have been acquired at fair value (determined as the average annual market share price of the
Company’s shares) based on the monetary value of the subscription rights attached to outstanding share
options. The number of shares calculated as above is compared with the number of shares that would have
been issued assuming the exercise of the share options.
Diluted earnings per share for the years ended December 31, 2010 and 2009, is calculated as follows:
59
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Diluted earnings per preferred share are equal to basic earnings per preferred share because stock options
are not applicable to preferred shares.
a. Cash flows from operating activities as of December 31, 2010 and 2009 consist of the following:
Adjustments for:
(38,597) (21,064)
Reversal of allowance for bad debt
Gain on disposal of investment assets (472,449) (28,330)
Gain on disposal of property, plant and equipment (205,938) (142,958)
Other income/expense 187,346 (870,736)
Adjustments, total ₩ 12,100,810 ₩ 8,891,435
60
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
b. Significant transactions not affecting cash flows for the years ended, 2010 and 2009, are as follows:
c. The Company reported on a net basis cash receipts and payments arising from transactions occurring
frequently and financial instruments, loans, borrowings which maturity in less than 3 months.
The Company is exposed to credit risk, liquidity risk and market risk. Market risk arises from currency risk,
interest rate risk and fair value risk associated with investments. The Company has a risk management
program in place to monitor and actively manage such risks.
Also, financial risk management officers are dispatched to the regional head quarters of each area including
United States of America, England, Singapore, China, Japan, and Brazil to run and operate a local financial
center for global financial risk management.
The Company’s financial assets that are under financial risk management are composed of cash and cash
equivalents, short-term financial instruments, available-for-sale financial assets, trade and other receivables
and other financial assets. The Company’s financial liabilities under financial risk management are composed
of trade and other payables, borrowings and debentures and other financial liabilities.
The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the United States of America, European Union, Japan, other Asian countries and South America.
Revenues and expenses arise from foreign currency transactions and exchange positions, and the most widely
used currencies are the US Dollar, EU’s EURO, Japanese Yen and Chinese Yuan. To minimize foreign
exchange risk arising from operating activities, the Company’s foreign exchange management policy requires
61
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
all normal business transactions to be in local currency, or cash- in currency be matched up with cash-out
currency. The Company’s foreign risk management policy also defines foreign exchange risk, measuring
period, controlling responsibilities, management procedures, hedging period and hedge ratio very specifically.
The Company limits all speculative foreign exchange transactions and operates a system to manage
receivables and payables denominated in foreign currency. It evaluates, manages and reports foreign currency
exposures to receivables and payables.
A summary of foreign assets and liabilities of the Company as of December 31, 2009 and 2010 is as follows:
(Unit: ‘000)
2010 2009
USD EUR JPY Other USD EUR JPY Other
Financial Asset 28,473 44 145 - 58,050 38,287 86 7,215
Financial
741,921 669 104,778 16,062 1,015,783 25,485 14,857 14,964
Liabilities
The effect of foreign currency risk to net income is a sum of net foreign currency fluctuations of Korean Won
against other foreign currency fluctuations. Foreign currency exposure to financial assets and liabilities of a 5%
currency rate change against the Korean Won are presented below.
The Company’s investment portfolio consists of direct and indirect investments in listed and non-listed
securities. The market values for the Company’s equity investments for the year-ended December 31, 2010
and 2009 are ₩2,651,151 million and ₩1,278,188 million respectively. Refer to Note 7.
If there is change in price of equity investment by 1%, the amount of other comprehensive income changes
for the year-ended December 31, 2010 and 2009 are ₩24,287 million and ₩11,979 million, respectively.
Interest rate risk is defined as the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk mainly
arising through interest bearing liabilities and assets. The Company’s position with regard to interest rate risk
exposure is mainly driven by its debt obligations such as bonds, interest-bearing deposits and issuance of
receivables. In order to avoid interest rate risk, the Company maintains minimum external borrowing by
62
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
facilitating cash pooling systems on a regional and global basis. The Company manages exposed interest rate
risk via periodic monitoring and handles risk factors on a timely basis.
As at the reporting date, the interest rate profile of the Company’s interest bearing assets and liabilities is
presented in the table below:
Credit risk arises during the normal course of transactions and investing activities, where clients or other
party fails to discharge an obligation. The Company monitors and sets the counterparty’s credit limit on a
periodic basis based on the counterparty’s financial conditions, default history and other important factors.
There were no significant loans or other receivables which are overdue or subject to impairment, included in
accounts receivables or other financial instruments. The Company has evaluated there is no indication of
default by any of its counterparties.
Credit risk arises from cash and cash equivalents, savings and derivative instruments transactions with
financial institutions. To minimize such risk, the Company transacts only with banks which have strong
international credit rating (S&P A above), and all new transactions with financial institutions with no prior
transaction history are approved, managed and monitored by the Company’s finance team and the local
financial center. The Company requires separate approval procedure for contracts with restrictions.
The top five customers account for approximately occupies 36.5% and 36.2% and ₩4,884,067 million and
₩3,594,209 million for the year ended 2010 and 2009, respectively, while the top three credit exposures by
country amounted to 25.4%, 18.3% and 11.8% (December 31, 2009: 23.2%, 17.9% and 13.5%), respectively.
The Company manages its liquidity risk to maintain adequate net working capital by constantly managing
projected cash flows. Beyond effective working capital and cash management, the Company mitigates
liquidity risk by contracting with financial institutions with respect to bank overdrafts, Cash Pooling or
Banking Facility agreement for efficient management of funds. Cash Pooling program allows sharing of
funds among subsidiaries to minimize liquidity risk and reduce financial expense.
The following table below is an undiscounted cash flow analysis for financial liabilities that are presented on
the balance sheet according to their remaining contractual maturity.
63
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The object of capital management is to maintain sound capital structure. Consistent with others in the
industry, the Company monitors capital on the basis of the debt to equity ratio. This ratio is calculated as total
liabilities divided by equity based on the financial statements.
During 2010, the Company’s strategy was to maintain a reliable credit rating. The Company has maintained
an A credit rating from S&P and A1from Moody’s, respectively throughout the period. The gearing ratios at
31 December 2010 and 2009 were as follows:
The chief operating decision maker has been identified as the Management Committee. The Management
Committee is responsible for making strategic decisions based on review of the group’s internal reporting.
The management committee has determined the operating segments based on these reports.
The Management Committee reviews operating profit of each operating segment in order to assess
performance and make decisions about resources to be allocated to the segment.
The operating segments are product based and include Digital media, Telecommunication, Semiconductor,
LCD and others.
64
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The segment information provided to the Management committee for the reportable segments for the year
ended 31 December 2010 and 2009 is as follows:
Total assets ₩42,508,566 ₩18,167,145 ₩22,603,835 ₩59,866,776 ₩44,265,268 ₩15,383,005 ₩4,803,663 ₩107,179,005
Digital Tele-
Total Media Communication Total Semiconductor LCD Others Total
Total segment
₩47,830,255 ₩16,247,477 ₩30,550,932 ₩44,635,307 ₩23,929,033 ₩20,706,274 ₩178,256 ₩92,643,818
Revenue
Inter-segment
(24,936) (20,710) (4,075) (2,812,971) (2,142,879) (670,092) (33,077) (2,870,984)
Revenue
Revenue from
external 47,805,319 16,226,767 30,546,857 41,822,336 21,786,154 20,036,182 145,179 89,772,834
customers
Operating
3,470,194 349,657 3,117,103 3,271,949 1,932,871 1,339,078 644,991 7,387,134
profit
Total assets ₩35,704,655 ₩13,149,173 ₩20,263,068 ₩47,322,646 ₩31,706,446 ₩12,883,218 ₩6,582,053 ₩89,609,354
65
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The regional segment information provided to the Management committee for the reportable segments for the
year ended 31 December 2010 and 2009 is as follows:
1) Subsidiaries
Area Subsidiaries
Korea Samsung Gwangju Electronics, STECO, SEMES, Samsung Electronics Service, Living Plaza,
Samsung Electronics Logitech, SECRON, S-LCD, Samsung Electronics Hainan Fiberoptics Korea
Samsung Electronics Football Club, Samsung Mobile Display, World Cyber Games, Samsung
Venture Capital Union #6, #7 and #14, Ray, GES
66
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Europe and Samsung Electronics Iberia (SESA), Samsung Electronics Nordic (SENA),
Africa Samsung Electronics Hungarian (SEH), Samsung Electronics Portuguesa (SEP),
Samsung Electronics France (SEF), Samsung Electronics (UK)(SEUK),
Samsung Electronics Holding (SEHG), Samsung Electronics Italia (SEI),
Samsung Electronics South Africa (SSA), Samsung Electronics Benelux (SEBN),
Samsung Electronics LCD Slovakia (SELSK), Samsung Electronics Polska (SEPOL),
Samsung Semiconductor Europe (SSEL), Samsung Electronics GmbH (SEG),
Samsung Semiconductor Europe GmbH (SSEG), Samsung Electronics Austria (SEAG),
Samsung Electronics Overseas (SEO), Samsung Electronics Europe Logistics (SELS),
Samsung Electronics Rus (SER), Samsung Electronics Rus Company (SERC),
Samsung Electronics Slovakia (SESK), Samsung Russia Service Center (SRSC),
Samsung Electronics Rus Kaluga (SERK), Samsung Electronics Baltics (SEB),
Samsung Electronics Ukraine Company (SEUC),
Samsung Electronics KZ and Central Asia (SEKZ),
Samsung Semiconductor Israel R&D Center(SIRC), Samsung Gulf Electronics (SGE),
Samsung Electronics Ukraine (SEU), Samsung Electronics Limited (SEL),
Samsung Telecoms (UK)(STUK), Samsung Electronics Kazakhstan (SEK),
Samsung Electronics Turkey (SETK), Samsung Electronics Levant (SELV),
Samsung Electronics Romania (SEROM), Samsung Electronics Czech and Slovak (SECZ),
Samsung Electronics European Holding(SEEH), Samsung Electronics Morocco (SEMRC),
Samsung Electronics Poland Manufacturing (SEPM), Samsung Electronics West Africa (SEWA),
Samsung Electronics Greece (SEGR), Liquavista B.V.( LV), Liquavista UK (LVUK),
Samsung Opto-Electronics GmbH (SOG)
China Samsung Electronics Hong Kong (SEHK), Samsung Electronics Taiwan (SET),
Samsung Electronics Huizhou (SEHZ), Samsung Electronics (Shandong) Digital Printing (SSDP),
Samsung Electronics Suzhou Semiconductor (SESS), Suzhou Samsung Electronics (SSEC),
Samsung Suzhou Electronics Export (SSEC-E), Samsung (China) Investment (SCIC),
Tianjin Samsung Electronics (TSEC), Tianjin Samsung Telecom Technology (TSTC),
Samsung Electronics Suzhou LCD (SESL), Samsung Electronics Suzhou Computer (SESC),
Shanghai Samsung Semiconductor (SSS),
Shenzhen Samsung Kejian Mobile Telecommunication Technology (SSKMT),
Samsung Electronics Hainan Fiberoptics (SEHF), Samsung Electronics (Beijing) Service (SBSC),
Samsung Semiconductor (China) R&D (SSCR), Beijing Samsung Telecom R&D Center (BST),
Samsung Electronics Shanghai Telecommunication (SSTC),
Samsung Electronics Shenzhen (SESZ), Samsung Electronics China R&D Center (SCRC),
Dongguan Samsung Mobile Display (DSMD), Tianjin Samsung Mobile Display (TSMD),
Samsung Guangzhou Mobile R&D Center (SGMC), Tianjin Samsung Opto-Electronics (TSOE),
Samsung Tianjin Mobile R&D (STMC), Liquavista HK (LVHK)
67
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
Rest of Asia Samsung Yokohama Research Institute (SYRI), Samsung Electronics Australia (SEAU),
Samsung Electronics Indonesia (SEIN), Samsung Asia (SAPL),
Samsung Electronics Asia Holding (SEAH), Samsung Electronics Display (M)(SDMA),
Samsung Electronics (M)(SEMA), Samsung Vina Electronics (SAVINA),
Samsung India Electronics (SIEL), Thai Samsung Electronics (TSE),
Samsung Electronics Philippines (SEPCO), Batino Realty Corporation (BRC),
Samsung Electronics Philippines Manufacturing (SEPHIL), Samsung Japan (SJC),
Samsung Telecommunications Indonesia (STIN), Samsung Malaysia Electronics (SME),
Samsung Electronics Vietnam (SEV), Samsung India Software Operations (SISO),
Samsung Telecommunications Japan (STJ), Samsung Telecommunications Malaysia (STM)
Samsung Bangladesh R&D (SBRC)
Significant transactions with subsidiaries for the periods ended December 31, 2010 and 2009, and the related
receivables and payables as of December 31, 2010 and December 31, 2009, are as follows:
2) Associates
The principal associate companies are Samsung SDI Co., Ltd., Samsung Electro-mechanics, Samsung SDS,
Samsung Techwin Co., Ltd., and Samsung card Co., Ltd.
Transactions with associates for the years ended December 31, 2010, 2009, and the related receivables and
payables as of December 31, 2010, 2009 are as follows:
68
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
3) Joint ventures
The principal joint venture companies are Samsung Corning Precision Glass, and Samsung Siltronic Wafer.
Transactions with joint venture partners for the years ended December 31, 2010, 2009, and the related
receivables and payables as of December 31, 2010, 2009 are as follows:
Samsung Everland and Samsung Petrochemical, etc. are defined as related parties for the Company.
Transactions with other related parties for the years ended December 31, 2010, 2009, and the related
receivables and payables as of December 31, 2010, and 2009 are as follows:
Inter-company transactions
Sales ₩ 572,282 ₩ 3,298
Purchases 436,717 293,794
2010 2009
Receivables and Payables
Receivables 231,811 213,889
Payables 107,422 59,724
Key management includes directors (executive and non-executive), members of the Executive Committee.
The compensation paid or payable to key management for employee services is shown below:
69
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The Company acquired Samsung Digital Imaging Co., Ltd. with a closing date of April 1, 2010 to improve
shareholders’ value through enhancement of business efficiency and maximization of synergy effect with
other existent businesses. The acquisition of Samsung Digital Imaging Co., Ltd. was approved by the Board
of Directors of the Company on December 15, 2009.
The shareholders of Samsung Digital Imaging Co., Ltd. received 0.0577663 shares of the Company’s
common stock for each share of Samsung Digital Imaging Co., Ltd. common stock owned on the
closing date. The Company transferred its treasury stocks to the shareholders of Samsung Digital
Imaging, instead of issuing new stocks to them.
The following table summarizes the consideration paid for Samsung Digital Imaging Co., Ltd. and the
amounts of the assets acquired and liabilities assumed recognized at the acquisition date.
Classification Amount
(In millions of Korean Won)
I. Considerations transferred
Fair value of consideration transferred (*1) ₩ 812,154
Fair value of previously held equity interest in the acquiree (*2) 278,949
Total ₩ 1,091,103
II. Identifiable assets and liabilities
Cash and cash equivalents 56,016
Trade and other receivables (*3) 308,933
Inventories 25,671
Property, plant, and equipment 23,028
Intangible assets 307,454
Other financial assets 104,461
Trade and other payables (227,992)
Short-term borrowings (83,660)
Long-term trade and other payables (7,806)
70
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
(*1) The Company transferred its treasury stocks to the shareholders of Samsung Digital Imaging Co.,
Ltd and re-measured the transferred treasury stock at its acquisition-date (April 1, 2010) fair value.
The Company recognized ₩398,090 million of gain on disposal and has paid ₩15,921 million
for the odd-lot prices.
(*2) The Company held 25.5% of equity interest in Samsung Digital Imaging Co.,Ltd. and remeasured
its previously held equity interest at its acquisition-date (April 1, 2010) fair value. Accordingly,
the Company recorded resulting gain of ₩241,754 million.
(*3) Fair value of acquired trade and other receivables (₩308,933 million) include trade receivables
amounting to ₩295,648 million.
(*4) The goodwill of ₩624,283 is attributable to increased efficiency of digital camera business
management and the synergy effect expected from combining Samsung Digital Imaging Co., Ltd.
and the related existing businesses.
If the acquisition had occurred on January 1, 2010, the revenue and net profit for the year ended December 31,
2010 would have increased by ₩367,489 million and ₩156 million, respectively. The amounts of revenue
and net profit of the acquiree since the acquisition date (April 1, 2010) included in the statement of income
for the year ended December 31, 2010 are ₩1,385,402 million and ₩50,103 million, respectively.
The Company acquired Samsung Gwangju Electronics with a closing date of January 1, 2011 to improve
shareholder value through enhancement of business efficiency and manufacturing competitiveness in the
digital media (appliance) business. The approval of the Board of Directors of the Company replaces
shareholders’ meeting approval of the acquisition, as the acquisition of Samsung Gwangju Electronics is a
small and simple merger as defined in the commercial law.
(1) Overview of the acquired company
71
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
The shareholders of Samsung Gwangju Electronics. received 0.0252536 shares of the Company’s
common stock for each share of Samsung Gwangju Electronics common stock owned on the closing
date. The Company transferred its treasury stocks to the shareholders of Samsung Gwangju Electronics,
instead of issuing new stocks.
Amount
Classification
(In millions of Korean Won)
(*1) The Company transferred its treasury stocks to the shareholders of Samsung Gwangju Electronics
Ltd., and re-measured the transferred treasury stock at its merger-date (January 1, 2011) fair value.
The Company recognized ₩31,316 million of gain on disposal and has paid ₩772 million for
the odd-lot prices.
The Company entered into contracts to acquire 43.5% of Medison’s shares and 100% of Prosonic’s shares,
for ₩331,384 million, on February 16, 2011 with approval of the Board of Directors on December 14, 2010.
72
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
To the President of
Samsung Electronics Co., Ltd.
We have reviewed the accompanying management’s report on the operations of the Internal
Accounting Control System (“IACS”) of Samsung Electronics Co., Ltd. (the “Company”) as of
December 31, 2009. The Company’s management is responsible for designing and operating IACS
and for its assessment of the effectiveness of IACS. Our responsibility is to review the management’s
report on the operations of the IACS and issue a report based on our review. The management’s report
on the operations of the IACS of the Company states that “based on its assessment of the operations
of the IACS as of December 31, 2010, the Company’s IACS has been designed and is operating
effectively as of December 31, 2010 in all material respects, in accordance with the IACS standards
established by the Internal Accounting Control System Operations Committee (IACSOC) of the
Korea Listed Companies Association.”
Our review was conducted in accordance with the IACS review standards established by the Korean
Institute of Certified Public Accountants. Those standards require that we plan and perform, in all
material respects, the review of management’s report on the operations of the IACS to obtain a lower
level of assurance than an audit. A review is to obtain an understanding of a company’s IACS and
consists principally of inquiries of management and, when deemed necessary, a limited inspection of
underlying documents, which is substantially less in scope than an audit.
A company’s IACS is a system to monitor and operate those policies and procedures designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting principles generally accepted
in the Republic of Korea. Because of its inherent limitations, IACS may not prevent or detect a
material misstatement of the financial statements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on our review, nothing has come to our attention that causes us to believe that management’s
report on the operations of the IACS, referred to above, is not presented fairly, in all material respects,
in accordance with the IACS standards established by IACSOC.
Our review is based on the Company’s IACS as of December 31, 2010, and we did not review
management’s assessment of its IACS subsequent to December 31, 2010. This report has been
prepared pursuant to the Acts on External Audit for Stock Companies in Korea and may not be
appropriate for other purposes or for other users.
Samil PricewaterhouseCoopers
March 2, 2011
73
Samsung Electronics Co., Ltd.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS
I, as the Internal Accounting Control Officer (“IACO”) of Samsung Electronics Co., Ltd. (“the
Company”), assessed the status of the design and operations of the Company’s internal accounting
control system (“IACS”) for the year ended December 31, 2010.
The Company’s management including the IACO is responsible for designing and operating the IACS.
I, as the IACO, assessed whether the IACS has been effectively designed and is operating to prevent
and detect any error or fraud which may cause misstatements to the financial statements, for the
purpose of establishing the reliability of financial reporting and the preparation of financial statements
for external purposes. I, as the IACO, applied the IACS standards to assess the design and operations
of the IACS.
Based on the assessment on the operations of the IACS, in all material respects, the design and
operations of the Company’s IACS were effective as of December 31, 2010, in accordance with the
IACS standards.
Yoon, Ju Hwa
Internal Accounting Control System Officer
Choi, Gee-sung
Chief Executive Officer or President
74